GST Update on Whether provisional attachment of bank account valid if no proceedings pending? 026/2020-21

GST Update on Whether provisional attachment of bank account valid if no proceedings pending?

One of the tools given to the revenue authorities to protect the interest of government revenue is the right to attach the property of the assessee including bank account but this discretion is to be exercised very judiciously. It is often observed that the bank accounts of the assessee is being attached for recovering dues which are very insignificant and even if no proceedings under the specified sections are pending against the assessee. The present update seeks to discuss the landmark judgment given by the Hon’ble Bombay High Court in the case of Kaish Impex (P) Ltd. Vs Union of India [2020 (114) Taxmann.com 300 (Bombay)] wherein it was held that the attachment of bank account when no proceedings were pending against the petitioner is not proper.
Before proceeding further, provisions contained in section 83 of the CGST Act 2017 relating to ‘Provisional attachment to protect revenue in certain cases’ are worth noting which reads as follows:-
“(1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effect after the expiry of a
period of one year from the date of the order made under sub-section (1).”

A quick reading of the above referred section clearly states that any property or bank account of a taxable person can be provisionally attached only when there are proceedings pending under Section 62,63,64,67,73 and 74 of the CGST Act 2017. In the case of Kaish Impex Pvt. Ltd., only summon was issued to the petitioner under section 70 of the CGST Act, 2017 with respect to investigation initiated against another taxable person. The Hon’ble Bombay High Court held that summons issued to the petitioner in case of proceedings under section 67 initiated against another taxable person cannot be the grounds to attach bank account of the petitioner. This decision is an eye opener for the revenue authorities that bank account cannot be attached at the whims of the revenue authorities.
Practically, many assessees have also faced problem wherein their bank accounts have been attached for non-payment of interest on delayed payment of taxes. This judgment would provide immense relief to such assessees.
It is pertinent to note that similar decision was given by the Hon’ble Bombay High Court in the case of Gehna Trading LLP by placing reliance on the decision given in the case of Kaish Impex Pvt. Ltd.

To sum up, under GST regime, tax officers have been vested with powers of attachment of property and bank accounts to protect the interest of revenue but the revenue authorities should understand that this power should not be exercised in every case without considering the gravity and need of invoking such provisions.

This is solely for educational purpose.
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GST Update on Whether provisional attachment of bank account valid if no proceedings pending? 026/2020-21

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